How to Pay Yourself From a Limited Company in Ireland: Salary, Dividends, Pension and Directors' Loans

The money in your company's bank account is not your money. It belongs to the company, and moving it to your personal account is a taxable event in one form or another, unless the company is repaying money it owes you. Directors who treat the company account as an extension of their own, drawing what they need and sorting it out at year end, usually end up paying more tax than they should, and sometimes a charge they did not know existed.

This guide explains the four legitimate ways money leaves a company, what each one costs in tax, and why directors' loans deserve their own section. It finishes with a worked example of extracting €100,000 of profit.

The four ways money leaves a company

1. Salary, including bonuses and benefits in kind, paid through payroll.
2. Dividends, paid out of profits that have already borne corporation tax.
3. Employer pension contributions, paid by the company into a pension in your name.
4. A loan from the company to you, which is permitted within limits but carries its own tax charge.

Repaying money you have lent to the company, or reimbursing business costs you paid personally, is not taxable. Anything else, such as the company paying your personal bills, is treated as one of the above, usually as a benefit in kind or a distribution, whether or not it was intended that way.

Salary: the default route

Salary is deductible for the company, so it reduces the profit charged to corporation tax at 12.5%. You pay income tax, USC and PRSI on it personally through payroll.

A director who owns or controls more than 15% of the company is a proprietary director and claims the earned income credit of €2,000 rather than the PAYE credit. The director's PRSI class is decided under social welfare rules: a director holding at least half the shares is insurable at Class S, which is 4.2% to 30 September 2026 and 4.35% from 1 October 2026, deducted through payroll, while smaller shareholdings are assessed by the Department of Social Protection on the facts. There is no employer PRSI on a Class S director's salary, which makes salary cheaper for the company than paying the same amount to an ordinary employee.

For a single director with no other income, salary up to €44,000 in 2026 is taxed at 20% income tax plus USC and PRSI. Above that the income tax rate is 40%, and the combined marginal rate on salary above €70,044 is 52%. Salary is the right vehicle for the money you need to live on. It is an expensive vehicle for money you do not.

The Finance (No. 2) Bill 2026 raises the 20% band for a single person to €46,500 and the personal, PAYE and earned income credits to €2,125 from 1 January 2027, and widens the 2% USC band to €30,300. The Bill is not yet law. Separately, PRSI rates are already scheduled to rise again on 1 October 2027.

Salary also has to be paid and taxed in real time. A director who draws money during the year and declares a salary at year end is operating payroll late, and Revenue treats unpaid payroll taxes seriously. Our salary after tax calculator shows the net figure for any salary level.

Dividends: taxed twice and rarely the best option

A dividend is paid out of profit after corporation tax. It is not deductible for the company, so the profit has already borne 12.5%. The company must deduct dividend withholding tax at 25% and pay it to Revenue, and you then pay income tax, USC and PRSI on the gross dividend personally, with credit for the 25% withheld.

For a director on the 40% rate, a dividend therefore costs 12.5% inside the company and then about 52% personally, rising to about 55% on non-PAYE income above €100,000. Salary costs only the personal layer, because it is deductible. That is why dividends are rarely the most efficient way for an owner-director to take income in Ireland.

Dividends do have a use. They are the mechanism for clearing the close company surcharge on undistributed rental and investment income, and they can be paid to shareholders who are not working in the business. A dividend declared for the accounting period and paid within 18 months of its end counts as a distribution for the surcharge rules, as explained in our guide to the close company surcharge.

Employer pension contributions: the most efficient route for surplus profit

An employer contribution to a director's pension is deductible for the company, is not a benefit in kind for the director, and is not restricted by the age-related percentage limits that cap personal contributions. A PRSA contribution is deducted in the period it is paid. For an occupational scheme, a large one-off contribution on top of the normal annual contribution can be spread by Revenue over several years.

The money grows free of tax inside the pension and is taxed only when drawn down, when 25% of the fund can normally be taken as a lump sum, tax-free up to a lifetime limit of €200,000.

Since 1 January 2025, employer contributions to a director's PRSA are deductible and free of benefit in kind only up to 100% of the director's emoluments for the year. A director on a salary of €50,000 can therefore have up to €50,000 contributed by the company in the same year. Contributions above that limit are a taxable benefit in kind and are not deductible. Occupational pension schemes have their own funding limits based on salary and service.

For a director with more profit than they need, this is usually the first place to look. Profit that would bear 52% as salary bears nothing on the way in and is taxed at retirement rates on the way out. Our guide to pension contributions and income tax covers the personal side.

Directors' loans: permitted, but with a tax charge

Can you transfer money from your limited company to your personal account without declaring a salary or dividend? If the company owes you money, for example because you lent it funds or paid business costs personally, it can repay you tax-free. Otherwise, the transfer is a loan. Loans from a company to a director are a normal feature of owner-managed companies, but they carry a tax charge that is often overlooked, and they must be handled correctly under company law as well.

The section 438 charge

Where a close company, which includes almost every Irish owner-managed company, lends money to a shareholder or to a shareholder's family member, the company must pay income tax to Revenue at the standard rate on the grossed-up amount of the loan. A loan of €1,000 is treated as a payment of €1,250, and the company pays €250 to Revenue. In practical terms, the company pays 25% of the loan amount.

The charge is included in the company's corporation tax return and forms part of its preliminary tax obligations, although Revenue does not require it to be included in preliminary tax where the loan is repaid by the CT1 filing date, unless a new loan is taken out on or shortly after repayment. It is not deductible for corporation tax, and the director gets no credit for it. The loan itself is not treated as the director's income.

However, if the loan is interest-free or charges less than Revenue's specified rate (13.5%, or 4% for a loan used to buy, repair or improve the director's main home), the director is taxed separately on the interest saved as a benefit in kind through payroll.

When the loan is repaid, the company can claim the tax back. The claim can be made within four years of the end of the tax year in which the loan was repaid. Keeping the director's loan account clean at year end, and claiming the refund promptly once a loan has been repaid, stops the company's cash sitting with Revenue for longer than it needs to.

The small loan exemption

The charge does not apply where all three of these conditions are met:

• The loan, together with any other loans to the director or their spouse from the company or an associated company, does not exceed €19,050.
• The borrower works full-time for the company or an associated company.
• The borrower, together with their associates, does not own or control more than 5% of the company.

The last condition means the exemption rarely helps an owner-director. It is aimed at employees with small shareholdings.

What happens if the loan is written off

If the company writes off or releases the loan, the director is treated as receiving income equal to the amount written off grossed up at the standard rate. A €6,000 write-off is treated as €7,500 of income, taxable under Case IV, with a non-refundable credit for the notional €1,500 of tax. The tax the company paid on the original loan is not recoverable for the part written off. Writing off a director's loan is therefore one of the more expensive ways to extract money.

Revenue's separate manual on preferential loans treats a loan written off for a director or employee as pay, taxed through payroll, so confirm which treatment applies before any write-off.

Company law

Separately from tax, the Companies Act restricts loans by a company to its directors and persons connected with them. The general rule is that such loans above a modest proportion of the company's net assets require a formal approval process, and a loan made outside the rules can be voided by the company and can leave the directors personally liable. Take advice from your solicitor or company secretary before the company lends to a director, and record the loan properly in the accounts.

Expenses and benefits

The company can pay for genuine business expenses without any personal tax: travel for business, equipment, a phone used for work, professional subscriptions and so on. Where the company pays for something with a personal element, such as a car, health insurance or a personal bill, the director is taxed on it as a benefit in kind through payroll. Our guide to company car tax covers the largest benefit most directors receive. Paying personal expenses from the company account and leaving them in the director's loan account is the single most common way directors create a section 438 charge without realising it.

Worked example: extracting €100,000 of profit

A single director with no other income, insurable at Class S so there is no employer PRSI, has a company with €100,000 of profit before paying themselves in 2026. Three approaches, with rounded figures:

• All salary. The company pays €100,000 in salary and has no corporation tax. The director pays about €35,500 in income tax, USC and PRSI and keeps about €64,500. Nothing is left in the company.
• Salary of €44,000 and the balance retained. The director pays about €7,500 personally. The company pays corporation tax of €7,000 on the remaining €56,000 and keeps €49,000. Total tax is about €14,500, but €49,000 is still inside the company and will be taxed again when it comes out.
• Salary of €44,000, an employer pension contribution of €44,000 paid into a PRSA (the maximum, at 100% of salary) and €12,000 retained. The director pays about €7,500 personally, the company pays €1,500 of corporation tax on the €12,000, and €44,000 is in a pension. Total tax now is about €9,000.

None of these is right for everyone. The first suits a director who needs the income. The third suits one who does not and wants to build a pension. The second is a deferral rather than a saving, and only pays off if the retained money is reinvested, extracted in a lower-income year, or sold with the company.

The close company label

All of the loan rules above, and the surcharge on undistributed income, apply only to close companies. A close company is one controlled by five or fewer participators, or by participators who are directors. Almost every Irish owner-managed company is a close company, so the rules apply almost universally to the readers of this guide. The CT1 asks specifically about loans to participators and about the surcharge, and a return that leaves those panels blank when a charge arises is an incomplete return. For how the company itself is taxed, see our guide to corporation tax in Ireland.

Getting help with your CT1 and corporation tax

We prepare CT1 returns for owner-managed companies, including the section 438 loan charge and close company surcharge where they arise, and we help directors settle on a salary, pension and dividend mix that fits their circumstances. Contact us today if you need help with CT filings, or get in touch here and we will get back to you.

Sources

The rules and figures in this guide are taken from:

• Tax and Duty Manual Part 13-02-03, Company Charge to Income Tax on Loans to Participators, for the section 438 charge
• Tax and Duty Manual Part 13-02-04, Preliminary Corporation Tax on Loans to Participators in Close Companies, for preliminary tax on directors' loans
• Tax and Duty Manual Part 05-01-01d, The Provision of Preferential Loans, for benefit in kind on cheap loans
• Tax and Duty Manual Part 13-02-05, Surcharge on Certain Undistributed Income of Close Companies, for the 18-month dividend rule
• Tax and Duty Manual Part 02-02-01, Corporation Tax: General Background, for dividends and distributions
• Chapter 24 of the Revenue Pensions Manual, for the employer PRSA limit
• Chapter 27 of the Revenue Pensions Manual, for the lump sum limit
• Notes for Guidance on Part 30 TCA 1997, for large occupational scheme contributions
• PRSI Contribution Rates and User Guide 2026 (SW14), Department of Social Protection, for PRSI rates
• Explanatory Memorandum to the Finance (No. 2) Bill 2026, Department of Finance, for the 2027 income tax and USC changes

The SW14 guide contains Irish Public Sector Information, and the Revenue material is provided courtesy of the Revenue Commissioners, both under a Creative Commons Attribution 4.0 International (CC BY 4.0) licence.